Diageo CEO Ivan Menezes’s pay cut by £1.1 million as performance lags

Diageo slashed the variable portion of Ivan Menezes’ compensation by 35%, reducing his total pay for the latest financial year to £3.4 million from £4.5 million a year earlier. Photo: Hemant Mishra/Mint

London: Diageo Plc cut the pay of its two top executives after the distiller missed performance targets, joining other UK companies in reining in management awards amid political and investor calls for restraint.

The London-based company cut the variable portion of chief executive officer (CEO) Ivan Menezes’ compensation by 35%, reducing his total pay for the latest financial year to £3.4 million ($4.4 million) from £4.5 million a year earlier. That part of chief financial officer (CFO) Kathy Mikells’ package was reduced by half, the company said in its annual report published on Tuesday.

Menezes and Mikells are the latest of a number of UK executives whose pay has been cut after Prime Minister Theresa May decried the “irrational, unhealthy and growing gap” between compensation of managers and ordinary workers. Bosses of companies in the FTSE 100 Index made an average of £4.5 million in 2016, down 17% from 2015, according to the High Pay Centre.

Diageo sets variable pay, including some share awards, based on average financial performance over the previous three years, gauged by the shareholder return, profit margin and sales growth. While net sales grew 4.3% in the 12 months that ended 30 June, performance was weaker in the previous two years.

Diageo has stepped up efforts to boost its performance by selling assets such as the Gleneagles Hotel in Scotland and some wine brands to focus on its core whiskey and vodka lines.

The company’s shares have risen since the UK’s vote to leave the European Union weakened the pound, lifting the value of overseas sales when converted into sterling. The stock got a further bump to record highs after Diageo announced a £1.5 billion buyback in July.Bloomberg